New Business Levy to Fund $3.8B Mental Health Reform: Victorian Budget

May 20, 2021 Updated: May 20, 2021

Victorian-based businesses will be levied with a new surcharge to rebuild the state’s “broken” mental health system, according to the state’s newly released 2021-22 budget.

On Thursday, Treasurer Tim Pallas revealed the state of Victoria’s economy, which is expected to reach a net debt of $102.1 billion this year and increase to $156.3 billion in 2024-25.

The state has responded with a suite of new taxes to balance the books, as well as new initiatives targeting the health, education, and transport sectors.

The newly announced Mental Health and Wellbeing Levy will bankroll the state’s $3.8 billion mental health system reform.

Businesses with over $10 million in revenue will be liable to pay the levy. So, for every dollar of wages paid over $10 million, a business will pay the state a 0.5 percent surcharge.

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Victorian Treasurer Tim Pallas delivers his budget speech in the Legislative Assembly at Victorian State Parliament in Melbourne, Australia on May 20, 2021. (AAP Image/James Ross)

For businesses with payrolls exceeding $100 million, that surcharge increases to 1 percent for each dollar.

Pallas estimates 5 percent of employers will be affected and predicts the measure will raise $900 million per year by 2024-25—approximately $3 billion in total.

“Many big businesses have continued to profit through the pandemic—pocketing taxpayer subsidies along the way,” Pallas told Victoria Parliament.

“We’re asking those businesses to help deliver a generational reform, after one of the most mentally taxing years of our lives.”

The initiative will address one of 74 recommendations by the Royal Commission into Victoria’s Mental Health System. Around $1.5 billion will go towards establishing 20 of the recommended 50 to 60 local mental health hubs, while $954 million will be spent replacing 22 existing services.

The state budget papers also revealed how Victoria was coping with the fallout of recent pandemic lockdowns, with the state expected to run a deficit of $11.6 billion in the 2021-22 financial year—down from the projected $13.1 billion.

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A general view of an empty street in the central business district in Melbourne, Australia on Feb. 14, 2021 (Wayne Taylor/Getty Images)

In the succeeding years, forecasts predict the deficit should narrow to $3.8 billion (2022-23), $2.1 billion (2023-24), and then achieve a surplus of $1.1 billion (2022-23), and $3 billion (2024-25).

The budget also rests on the presumption that future outbreaks of the pandemic are localised and can be contained.

The Victorian government also announced a suite of new taxes targeting property investors and homebuyers to work off the state’s debt, including raising land taxes and stamp duty on multi-million-dollar properties.

Business Council of Australia CEO Jennifer Westacott was critical of the new mental health levies saying it set a “dangerous precedent.”

“While we welcome mental health reform which is much needed to deal with systemic issues and the devastating impact of a long and disproportionate lockdown, an approach that pits some Victorians against others by taxing jobs makes everyone a loser,” she said in a statement.

“These are the same employers who kept workers on their books during more than 100 days of lockdown, paid them when they couldn’t work because of government decisions and kept services running,” she added.

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Cafes in Melbourne’s Degraves street open for dine in customers in Melbourne, Australia on June 01, 2020. (Darrian Traynor/Getty Images)

Tim Piper of the Australian Industry Group, the nation’s peak employer association, acknowledged the importance of mental health but said additional taxes were a concern.

“The payroll tax levy related to mental health funding, while directly impacting only a small proportion of businesses, will dampen jobs growth and add another cost to doing business in the state,” he said in a statement.

“The recourse to additional stamp duty in part reflects the lack of revenue options facing the states and territories,” he said, warning that stamp duty has oft-been criticised for being an inefficient tax.

Meanwhile, Angus Clelland, CEO of Mental Health Victoria, commended the budget saying it was the “single biggest investment” in mental health of any government in Australia, which eclipsed the federal government’s $2.3 billion commitment to the sector last week

“Today’s budget represents the culmination of more than two decades of advocacy efforts from individuals, carers, families, peak bodies, and mental health professionals from across Victoria,” he said in a statement.

“We often refer to mental health as the poor cousin of the health system. The funding announced today—and the budgets that will follow—will address this historic imbalance.”